Ace buys Chubb: what it means for insurance technology

Ace buys Chubb: what it means for insurance technology
Today’s blockbuster announcement of Ace buying Chubb will have a lot of industry ramifications—some of which will play out in the IT sphere. No doubt there has already been an IT assessment element in each insurer’s due diligence efforts. Between now and the effective date of the merger, there will be a lot of planning focused on:
  • Efficiencies and platform rationalization–aka “let’s figure out what is the right number of core systems, which core systems will be the survivors, and how data conversion and integration will work”
  • Cloud, SaaS, data management/stores, and analytics
  • Professional service and SI support capabilities that can scale to the new Chubb
  • Which systems will best support a digital roadmap
Some seemingly redundant systems may survive—at least over a 1 to 3 year period. For that to happen, the business (and/or various geographies’ compliance) requirements of the operating units using these system will be too divergent or too difficult to quickly build into a single surviving system. All this reinforces the reigning market message to insurance technology firms. If you want to be around in 10 years:
  • Design highly configurable and agile systems that feature ease of integration
  • Have enough scale to meet the needs of bigger and bigger insurer customers—grow, merge, or wither
 

Striking data point from Mary Meeker’s Internet Trends 2015 report

Striking data point from Mary Meeker’s Internet Trends 2015 report
I spoke this morning with an operations executive at a large insurer which distributes personal lines products through independent agents. He said that they are working feverously to deliver digital service tools to the customer service representatives (CSRs) at agents because they know that the average CSR is now 19 to 26 years old. This insurer is transitioning from a telephony-centered approach to one which includes chat, secure messaging, and intelligent avatars in order to meet CSRs’ expectations about how service should be done. As any insurer distributing through the independent channel knows, the company that keeps the CSRs happy wins! In our innovation research, we repeatedly see the influence of Millennials’ expectations around the consumer experience, but a data point from Mary Meeker’s Internet Trends 2015 report identifies an equal, if not higher, motivator for change from workers. Millennials now represent the largest percentage of the U.S. workforce. Take a close look at Slide 109. It shows that in 2015, for the first time, Millennials make up 35% of U.S. workers. Gen X and Boomers represent 31% each. The data signals a tipping point and it is pretty clear which way this trend is going to continue. Watch as the buzzword “Worker Experience” is added to the already well-worn “Consumer Experience.” For insurers that want to gain an advantage with their own workers, and with their distributors’ CSRs, the field is wide-open. All they need to do is innovate, experiment, put some funds at risk, and transition to digital working. KPCB

Living with the Internet of Things (and crowd funding)

Living with the Internet of Things (and crowd funding)
Earlier this week some users of the Wink smart home hub found that their smart home hub was more useful as a door stop or brick than as a hub. A fix is being worked on and rolled out to customers but for me this looks like the teething problems of the still nascent Internet of Things movement and one of the hurdles Apple is trying to jump with the Apple Watch. Earlier this month I received a portable handheld scanner from Dacuda. It’s not unusual for me to receive gadgets in the post but this one was particularly interesting to me as I had been one of the kickstarter funders of the item and have been following it’s creation with some interest. It piqued my interest particularly because I’d seen the technology almost two decades ago in a research lab but not seen it come to market at a reasonable price – a scanner that one moves over the page and software builds a picture of the underlying document. This isn’t the first item funded via crowd funding I’ve bought. My keys have a tile attached to them and I’m still wearing the original Pebble wrist watch (with e-ink display). I guess this firmly places me as an early adopter in the Internet of Things, wearables and crowdfunding space. I don’t have a Wink hub although it’s sort of appealing but not available in the UK yet. So far though it hasn’t been all clear pastures and dreams ideally realised. The Internet of Things has it’s teething problems. Let’s take the Tile for instance, a small device that emits a bluetooth and short rage wifi signal so you can track it’s location from a phone or tablet, thus, never losing it. I used to have 3 of them and now have 2, that’s right I lost one. I was rushing out the door, the school run running a little behind schedule and forgot my phone. Somewhere on the brief journey I dropped the Tile and what it was attached to. Had I had my phone with me it would have given me the location of the last place it connected to the Tile, as it was it told me the last time it saw the Tile was at home. No matter, in theory if I retrace my steps I will come in range and be alerted that it is found. This didn’t work either so I assume it was picked up. Since the battery lasts two years perhaps someone with the app will go near it and it may yet find it’s way home – but not yet. Part user error and part an unfortunate series of events perhaps, but another technology found fallible and a dream not quite realised. The Pebble has been more successful. The fact I answer the phone when it rings is largely down to my smart watch rather than the phone these days and the wrist-borne notifications are hugely helpful. I use the misfit app on it to tell me I’m not doing enough exercise and a Withings smart body analyser at home to let me know the end result of not having done enough exercise – all great fun! I may still invest in the Apple Watch. I have a standing desk so do stand, something misfit on my pebble doesn’t track and I feel I want to be recognised digitally for this at least. The little handheld scanner is more work in progress. My son’s somewhat fascinated when it works and hugely interested in the errors it makes and where they are made – such is life as an early adopter. More teething issues there. No doubt though we as a population are moving to a world where anything we buy could be connected, where we can buy a $50 hub that controls our lighting from an app and it’s failure is covered in the global (technology) press and where we can fund and follow the development of gadgets we’ve dreamt of owning for a couple of decades (even if the software needs a little more work). So what does this have to do with insurance? The fact is the Internet of Things appears to be running apace, smart homes are being tried out by the early adopters and bugs are being squashed. Did you know with the Wink hub, the app on your phone and this $40 quirky+ge water sensor you can get alerted in real time regarding escape of water events? Ever been out of the house and come home to find the kitchen, bathroom or basement flooded? Indeed just yesterday Karen pointed out this article suggesting insurers are getting involved with smart homes. There’s a lot of buzz around health and life insurance in part driven by the Apple Watch launch. I’m looking forward to Apple doubling down on the HomeKit API or someone credible getting there first; I’m looking forward to the same boom around the Internet of Things and insurers handing out moisture sensors to home owners. I’m looking forward to prevention and intervention products, rather than selling services after a loss. Perhaps we just need to squash a few more bugs first.

Seeing claims and risks in 3D : Might HoloLens succeed where Google Glass didn’t?

Seeing claims and risks in 3D : Might HoloLens succeed where Google Glass didn’t?
There have been radical changes in user interface and computing technology over the last decade or two. The Nintendo Wii propelled a new style of gaming to the forefront and touch enabled smart devices have done wonders for Apple, Samsung and Google’s Android platform. All of this seems to have made Microsoft’s old WIMP based Windows platform less relevant, despite moves to touch enabled interfaces and Windows mobile in recent years. Perhaps now though Microsoft has found the key to the next generation interface with HoloLens. With a tip to Google Glass this is a wearable headset based system more focused on enabling the holograph interface to interact using augmented reality to undertake various tasks. Perhaps Microsoft have found the killer App Google Glass was missing? Or perhaps the high end 3D gaming style interfaces are better at capturing our imagination than the simpler, untilitarian mobile interfaces we find on todays phones…. What might this mean for the Insurance industry? The interfaces and augmentations imagined for loss adjusters and those in the field apply equally to this new technology, albeit the headset is much more intrusive. Leveraging this technology to engage with people on the ground and share a common visualisation, to direct loss engineers to the right items and help provide data about clients in catastrophe affected areas in a rich and useful manner are all possible. Augmented reality and chunky headsets aren’t new, but the experiences previewed by HoloLens have sparked the imagination of those who have seen and played with it. With the response to HoloLens being very positive so far I wonder if we will see a relaunch of Google Glass or it’s successor sooner than one might have expected. For those who are interested the technology appears to have it’s origins in big data, as this article from April last year talks about leveraging the Holograph interface for visualising large datasets.

From Her to Watson, and What’s Next?

From Her to Watson, and What’s Next?
Her is a 2013 American science fiction romantic comedy-drama film written, directed, and produced by Spike Jonze. The film follows Theodore Twombly (Joaquin Phoenix), a man who develops a relationship with Samantha (Scarlett Johansson), an intelligent computer operating system personified through a female voice. Jonze conceived the idea in the early 2000s after reading an article about Cleverbot, a web application that uses an artificial intelligence algorithm to have conversations with humans. I spent an entire day with Watson last Tuesday along with my colleague Dan Latimore (should read his blog about it! http://bankingblog.celent.com/2014/10/08/spending-a-day-with-ibms-watson/) and I could not avoid the resemblance, though IBM’s Watson is much more focused on the business side of the machine/human interaction and collaboration. Watson is a learning system that scales human expertise by extending our abilities to perceive, reason, and relate:
  • Perceiving: Watson understands the world as we do; it interprets sensory input beyond traditional data. Understands natural language; reads manuals, social data, blogs, consumer reviews, etc.
  • Reasoning: Watson thinks through complex problems; it deepens our analysis and inspires creativity. Makes inferences, evaluates pros and cons, and finds relationships between terms and concepts
  • Relating: Watson understands how we communicate, and personalizes its interactions with each of us. Responds in natural language, personalizes the interaction and provides reasons
  • Learning: Watson learns from every interaction, scaling our ability to build experience. Trains with experts and improves with feedback.
Imagine that you can take your best employee, your best agent, your best underwriter, your best adviser, your best risk manager and teach Watson, so it could be then supporting any other employee, business partner or even a customer,  24/7 across your organization. It is the most closer to cloning I have seen lately, without the moral dilemmas.  What if, based in its huge computing capacity and the ability to crunch and interpret TB of data in a very short time-frame it could provide you with more hypothesis and evidence than any human being you can hire? Imagine how accuracy and timeliness could save lives, assess risks better, lower your costs, provide a better understanding of what is going on, even under different circumstances. Watson’s aim is to become the best adviser to your employees, customers and partners while doing their job by leveraging the power and strength of search, analytic and cognitive capabilities. There is a real opportunity here to:
  • Amplify human cognitive strengths
  • Enable a deeper level of reasoning
  • Make decision trade-offs with higher levels of confidence
  • Democratize experience and knowledge within your organization and value chain
Financial institutions around the world are already working with IBM to make Watson smarter, covering more use cases and more languages. IBM has already made available and continues to work on content and APIs business ready on the cloud to make it easier for its ecosystem and clients to embed Watson services in their applications. IBM is already working on having Watson available for Japanese, Spanish and Brazilian Portuguese natural language interaction, and we should be hearing soon some news regarding the 1st Watson Client Experience Center in Latin America, replicating the one IBM has just inaugurated in New York’s Silicon Alley. IBM plans to open these centers in Melbourne, Sao Paulo, Dublin, London and Singapore. IBM’s Watson has already come up with a book of recipes and while I think it is true that the best way to a man’s heart is through his stomach, I don’t expect to fall in love with an avatar powered by Watson as in Jonze’s Her (I am happily married, thank you). I would like though to see soon how it helps me decide what are the best investments given my risk aversion profile or which is the best type of insurance (and coverages) I need given my needs and concerns. I would certainly love to see how underwriting capabilities improve and processes become more accurate and efficient, hopefully expecting better results for me, for the financial services institutions and why not expect to see some savings passed along to consumers? Today Watson is here; what’s next?   IMG_1080IMG_1046

Data Initiation Helps Define Digitization in Insurance

Data Initiation Helps Define Digitization in Insurance
My colleague Karen Monks and I have published a report on digital transformation in insurance recently. The main objective of this report was to identify differences in terms of digital transformation in insurance between different continents. However we have quickly noticed that the term “digitization” can generate confusion in insurance professionals’ mind. Celent defines digital transformation as the strategy of transferring as many manual tasks as possible into digital activities. This strategy can be achieved through different ways, including:
  • Process automation.
  • Selling products online.
  • Leveraging mobile devices and mobile technologies in general.
  • Dematerialization of documents and communication materials.
In addition, we believe that data gathering through all sorts of tools, and therefore data management and analytics, play an important role in digital transformation efforts. This been said I personally think there is a priority insurers should define when embarking in digital transformation initiatives. First of all I recommend them to set up a basic constraint as the corner stone of their digitization initiatives portfolio prioritization: data must be entered into their information system only once (not two, three times but only once). With this in mind they should reexamine all their core processes and find out where data leading to the same information is entered more than once. When this analysis is done they can start defining initiatives that will reduce these repetitive tasks. You’ll be surprised to see how this simple principle can generate drastic improvements to processes and drive higher automation, efficiency, etc. When doing this, I also advise insurers to question whether the unique initial data entry into their information system can be done differently. With this advice I am trying to get them think of what I call the second wave of digitization. Indeed, to me digital transformation initiatives nowadays assume that human action is the initial generator of new data within an information system. However with the Internet of Things concept that my colleague Donald Light explained in two reports recently (here and here), insurers can also automate the initial data entry by leveraging connected objects. No need for human action any longer then! To me there is a digitization sequencing insurers need to respect between these two phases. Indeed I think it is easier to generate value from the Internet of Things concept if an insurer has already well thought how to minimize repetitive tasks consisting in entering new data within their information system. Therefore I do think that insurers who have already done a great job at minimizing these tasks initiated by human action and who have an appetite to leverage the Internet of Things will be the leading insurers going forward.  

Risk, reward and cyber-scurity

Risk, reward and cyber-scurity
For most people the amount of time, skill and effort required to get access to our family photos far outweighs the possible value someone would find there in. Thus, security measures based on making it really quite difficult to get to the data while at the same time not too hard to use have become increasingly popular. I would file username and password security in here. Occasionally, the digital assets on the other side are valuable to the right group. Banks use 2 factor authentication and a variety of non-digital schemes to ensure security. Even World of Warcraft where rare digital swords and armour carry their own value offer broader measures of security to protect accounts. The recent leak of a number of celebrities private photos shows that there are other assets worth the time and effort required to break this level of security. The risk associated with the data insurers hold has to date been quite minimal. There are health, specialty lines and large commercial lines where this isn’t the case, but for most people the data held by insurers and available through portals is largely innocuous and available through other means. As insurers start to tap into wider data sources and the Internet of Things it is imperative that the industry considers how it protects it’s customers. A simple example from products available today: some insurers likely hold the real-time location of the car driven by celebrities and millionaires children, thanks to the increasing popularity of telematics based car insurance. This brings with it increased security, the opportunity to recover the car if stolen and the opportunity to bring much needed assistance swiftly if the car and driver suffer an  accident. In the wrong hands this data is sadly highly valuable and thus worth the time, effort and risk to assault and try to recover. Whilst the details around the leak are still emerging it is clear that it is incumbent on the providers of these services to offer sufficient security in the first place and to educate it’s users on appropriate use. To insurers looking at cloud and portals, I say consider the edge cases – the celebrities using your security for instance, those for whom there are organised groups who would be rewarded for getting the data. Take into account the type of data available through various security schemes and portals, some information is naturally less sensitive. No one will read a story about a film star’s driving score and premium due next month, but where they drove and when – well maybe that’s a headline you don’t want your name associated with.

You can take a horse to water but a pencil must be led: The challenge of “What does Digital really mean for the industry”?

You can take a horse to water but a pencil must be led:  The challenge of “What does Digital really mean for the industry”?
Recently, I facilitated a roundtable discussion on “What digital really means for the industry”. Over the last couple of years, we’ve run many similar roundtables on the topic. Each time we run one, it never ceases to amaze me around the lack of a common definition for what digital really means, not just across the industry between firms but also between individuals within the same firms. In fact, I’m sure that there is a PhD paper waiting to be written on the topic. One of my favorite set of questions at these events is to first ask the delegates how they define “digital” and then to follow-up by asking if this definition is shared across their organization. Generally, when you ask the first question, you get very articulate and clearly well-thought through strategic response that makes 100% rational sense. Then, when you ask the second question, you often get a look of despair or, at best, frustration with their colleagues who “just don’t get it” or are “pulling in different directions”. Well, I might be exaggerating a little here but hopefully you get the idea. From the experience of asking this question repeatedly over the last couple of years, it seems to me that there are two challenges around “what digital really means for the industry”. The first challenge relates to opportunities presented by technology, which range from the mundane (such as good old fashioned ‘Straight Though Processing’ and even the application of newer more exciting mobile technologies in customer engagement) through to the extreme (such as new device enabled propositions and business models fueled by the Internet of Things). This is the “what?” challenge, the one that we hear most about and the one that we can articulate the best. It’s tangible. You can see it. You can experience it. You can recognize what others are doing that you are not. There is no mystery around this challenge and you can build a program of change to address it. The second challenge is a more subtle one. It is “as old as them thar hills” and can be aptly summed up by the saying “You can take a horse to water but you can’t make it drink”. It’s also one that this industry, as well as others to be fair, have been struggling with every time there is a step-change in pace and direction. If you know where you need to head to, bringing the rest of the organization along with you is the next big challenge, especially when you’re a large and complex one. This is the challenge of “How?”. When discussing the topic with one insurer, he shared with me his view that “digital” is merely a term used to get his team to think differently about the way things are done. To stop his team thinking about the way they do things today and start thinking about what could be instead. For me, this was a refreshingly honest perspective. It was not about the devices, the technology or the Apps, it was about re-envisioning his business. To achieve this takes great leadership and mustering support around a shared vision. This brings me back to the title of this blog. Stan Laurel couldn’t have said it better (or maybe worse?) in “Way out West” … “You can lead a horse to water, but a pencil must be led”. Maybe now is the time to move the debate on to talk more about the “pencils” and the vital role that leadership has to play in addressing successful Digital Transformation? I’d be interested to hear your views about where the challenges around digital really lie for you.

Is the insurance industry facing a Cyber-Cat? Thousands of websites at risk to heartbleed bug…

Is the insurance industry facing a Cyber-Cat? Thousands of websites at risk to heartbleed bug…
No no – I’m not referring to an animated cat on an App but rather the announcement yesterday regarding the Heartbleed bug affecting the security of over 50% of the Internet according to some estimates. The bug affects the OpenSSL package and is believed to have been in the package since 2011. It affects the way the package deals with heart beat messages, hence the moniker given to the bug. There are already tools in use that exploit the bug and provide access to recent user data on compromised servers. There have been security alerts before with many large brands facing fines and media inquiries about their losses but this bug potentially affects hundreds of thousands of websites and many businesses globally, but why characterise this as a catastrophe and why would insurers be interested? In the last 2 to 3 years with the cost of data breaches growing significantly businesses have been offsetting the risk of a breach or loss through Cyber Liability Insurance Covers. Whilst the practice and cover is arguably in it’s infancy it’s popularity suggests that this sort of event could constitute a significant liability to insurers globally offering this cover. Further the event has some characteristics in common with other events requiring catastrophe response:
  • Many insured are at risk.
  • The event will likely draw the attention of governments and regulators.
  • Swift response will mitigate further loss.
There are some significant differences here though. Most notably in the event of hail, storm or flooding the insured are likely aware if their assets are affected or not – they may not know the extent of the loss but are likely aware if they need to claim. Increasingly risk aggregation and modelling tools are helping carriers and brokers understand the likely impact of catastrophe events. In this case however the insured may not be aware if they are compromised or not since the bug allowed for intrusions that would not be logged by the affected systems. In this case the advice is to determine if OpenSSL is used and if so then the server has been vulnerable, may have been compromised and should be patched immediately. The full statement regarding the bug is available at http://heartbleed.com/ although it is also covered at http://blog.fox-it.com/2014/04/08/openssl-heartbleed-bug-live-blog/ which contains some useful advice. Further coverage is available from Reuters and The Guardian. As noted on heartbleed.com – Apache and NGinx webservers are known to typically use the OpenSSL library and account for 66% of the Internet according to Netcraft’s April 2014 Web Server Survey. Google says that it is not affected however Yahoo has already reported that they are working to fix the affected services on their side. As always communication and collaboration is crucial to managing these events. Insurer clients of Celent may like to read Celent’s case study combining internal and external data to respond to a catastrophe.

Model Insurer Asia Summit: A quick overview

Model Insurer Asia Summit: A quick overview
Earlier this month, I attended the Model Insurer Asia Summit at the Fullerton Hotel in Singapore.  With approximately 50 delegates from across the APAC region, it was a fantastic event to learn from others, debate the key issues facing the industry, and network across the region. A total of 18 firms were recognised this year from over 8 countries, with entries ranging from large regional technology transformations through to novel uses of technology to enable propositions. Tokio Marine presented just one such novel use of technology to enable a proposition where an app-based avatar is employed to provide health advice for women based upon how their body is feeling in support of a health insurance product.  This solution goes as far to include tracking the insured’s body temperature using a smartphone and a connected thermometer in order to identify when they may be coming down with an illness.  I just love this idea!  After talking about the potential for personal telemetry within the health insurance sector for several years now within Celent, it’s great to see a live proposition racing towards it.  Since its launch in June 2013, Tokio Marine has added 250,000 users already. The overall Model Insurer Asia winner was awarded to Max Bupa Health Insurance (MBHI) from India.  Being a relatively new player in India at around four years old, MBHI had aggressive plans to launch new distribution channels whilst not losing sight of delivering an excellent customer service experience. It chose to implement a BPM solution to wrap around its existing applications, enabling it to deliver a consistent end-to-end process that achieved a 75% increase in processing capacity and 90% improvement in service level agreements.  This is a great example of how, when applied effectively, technology can truly deliver a differential business performance. To find out more about these (and the 16 other finalists), a copy of the Model Insurer Asia report can be downloaded by Celent clients at http://www.celent.com/reports/celent-model-insurer-asia-2014-case-studies-effective-technology-use-insurance. Finally, this year, we sandwiched the summit between two roundtable discussions: one on the use of digital and ‘big data’ to enable innovation in insurance; and the other one on regional distribution opportunities and challenges.  Round-table discussions of this nature are always a great way to get detailed insights around the main challenges facing firms quickly.  Unfortunately, I can’t share too much as they’re closed sessions and “what’s said in the room, stays in the room”.  However, what I can share with you is that many of the opportunities and challenges facing individual firms across the Asian region are shared with insurers from around the world.  There is a growing desire to provide a more engaging proposition with the end client, a need to secure new forms of distribution, and an acceptance that effective technology is at the heart of future business performance.  Sound familiar?  That said, unlike perhaps some other geographic regions, regional diversity in distribution, regulation, population prosperity, language, character set, and political goals, make it more difficult for insurers, vendors and SIs / consultancies to navigate with a ‘one size fits all’ policy.  It’s this diversity coupled together with the regional growth rates for emerging financial services that make the region one of the most fascinating to follow and one that we expect to see a lot more innovation come out over the coming decade.